• Home
  • Finance
    • Financial Management
    • Strategic Management
    • Investment Analysis and Portfolio Management
    • Project Management
    • Islamic Banking & Finance
    • Auditing
  • Marketing
    • Principle of Marketing
    • Marketing Management
    • International Marketing
    • Advertising & Promotion
    • Commercial Challenges
  • HRM
    • Human Resource Management
    • Principles of Management
    • Training & Development
    • Employee Performance Management
  • Others
    • Introduction to Business
    • Business Communication
    • Banking & Finance
    • Entrepreneurship
    • Economics
  • Personal Skills
  • Tips & Tricks
  • About Us
    • Contact US

Business Study Notes

B.Com, M.Com. BBA & MBA Exam Study Online

  • Home
  • Finance
    • Financial Management
    • Strategic Management
    • Investment Analysis and Portfolio Management
    • Project Management
    • Islamic Banking & Finance
    • Auditing
  • Marketing
    • Principle of Marketing
    • Marketing Management
    • International Marketing
    • Advertising & Promotion
    • Commercial Challenges
  • HRM
    • Human Resource Management
    • Principles of Management
    • Training & Development
    • Employee Performance Management
  • Others
    • Introduction to Business
    • Business Communication
    • Banking & Finance
    • Entrepreneurship
    • Economics
  • Personal Skills
  • Tips & Tricks
  • About Us
    • Contact US
Home » Discuss the Importance of Credit in Detail

Discuss the Importance of Credit in Detail

By Richard Daniels Reading Time: 3 mins
Updated November 27, 2016

If we could not deny the importance of money in business, then we can also never deny the importance of credit in business. Since the supply of money is the lifeblood of a borrowing economy, there are two sources which meet the capital requirements of the business. These are the savings of the people and commercial banks. Probably these Commercial Banks take the savings of money and borrowed them to the needy people as well as the businessmen.

Importance of Credit for Country

Below are the few points, which tells the importance of credit for country and how credit the make the economy strong.

  1. Credit enables the individual or business to “purchase ahead of ability” or “desire to pay”.
  2. The economic needs of agricultural, commercial and industrial sector of the economy are adequately met by the bank credit.
  3. Bank credit accelerates the process of economic development in the country by providing loan to the industries in time.
  4. Goods are purchased, processed, store and then sold at the appropriate time to consumers.
  5. The farm credit needed by farmers helps in increasing agricultural production in the country and helps the farmers in the development of agricultural.
  6. Bank credit facilitates the large scale production of goods and other necessities of life, which result in technological research and lowering the cost.
  7. From the bank credit, the transportation of commodities from one place to another place is also made easier and economical.
  8. The consumption needs of the consumers such as automobile, house and other necessaries are also met by the commercial credit.
  9. Supply of credit by bank to consumers and business, increases the rate of economic growth, which would have been limited with the savings of the people.
  10. The rate of interest is also influenced by the bank credit. The flexibility of bank credit regulates the rate of interest which has healthy effects on the production in the economy.
  11. Credit instruments, like bill of exchange, greatly facilitate international trade. Payments thus made without the actual movement of treasure to any large extent.
  12. With the help of credit, people with brilliant brain can utilize their abilities and qualities in running business enterprises. In the absence of credit, their talents would have gone waste.

Importance of Credit for Business

As w know that in cash transaction, the value of anything paid at once. But in case of any credit transaction the value is paid after some specific period of time. Thus, it shows the importance of credit for business. However, making payment after some time, this facility is allowed to only trusted persons. Hence credit involves two factors that is “Time” and “Confidence”.

If we work around our world, we will see that almost all the business dealings and other transaction are made on credit basis instead of cash. The credit system is becoming more popular replacing the use of money or cash day by day. In daily affairs, the goods and vehicle are bought and sold in the credit form, which is just a “Promise” to make the payment in “Future”. These payments are made in credit though different kinds of instruments, like cheque, bill of exchange and promissory note, etc. The importance of credit can be seen from the following points for business.

  1. Convenience in purchase and sales of goods though credit enables the consumers to purchase ahead of his ability.
  2. Through availability of credit, new business enterprises came into existence using their abilities effectively.
  3. There can be an economy in the use of metal money by using the credit money. Credit money is more safe and convenient than metal money.
  4. With the help of credit, government loan are available. These funds are used for the construction of projects for the use of general public.
  5. Now the production is carried on large scales. It is only possible when credit money is also available for over and excess funds for production. This is show the great importance of credit for business.
  6. Credit also help in overall production of goods in the country. The producers engaged in different type of production process can avail the facility of credit for their financial requirements.
  7. In international trade, the payments are made though bill of exchange, instead of making in cash or gold. This also enhances the importance of credit for business world.
  8. The credit money also helps to keep the prices in a stable position. Increase in money supply though credit increase the output of goods and services.
  9. Credit also results in improving the living standard of the peoples. When money supplies total increases, income and per capita also increases, then ultimately it leads to a good living standard.
  10. If the government is facing a deficit in her expenditure the shortfall can be covered by the sales of bonds. It is only possible though credit system.
Author at Business Study Notes
Richard DanielsAuthor at Business Study Notes

Hello everyone! This is Richard Daniels, a full-time passionate researcher & blogger. He holds a Ph.D. degree in Economics. He loves to write about economics, e-commerce, and business-related topics for students to assist them in their studies. That's the sole purpose of Business Study Notes.
Love my efforts? Don't forget to share this blog.

Related Posts:

  • Primary Functions of Commercial Banks
    Primary Functions of Commercial Banks
  • List The Importance Of Bank In Detail
    List The Importance Of Bank In Detail
  • Communication Strategies Definition | Types of Communication…
    Communication Strategies Definition | Types of Communication Strategies
  • What is the Process of Motivation? Explain in detail
    What is the Process of Motivation? Explain in detail
  • Capital Formation Definition | Components & Importance
    Capital Formation Definition | Components & Importance

Filed Under: Banking & Finance, Others Tagged With: importance of credit in the economy

Related Posts

System-Views-of-Management-image

System Views of Management

System Views System views of management associates with the Management division of the organization and it assumes that all of the organizations are … [Read More...]

Leadership Theories

Situational Leadership Theories

Situational Leadership Theories Situational model of leadership is a factor that emphasizes the behavior of the leaders regarding different situations. … [Read More...]

Behavioral Leadership Model

Behavioral Leadership Model

Leadership  Leadership is the most critical and complex responsibility across any organization. It is because the leadership requires to be realistic, … [Read More...]

career development process in hrm

Career Development Process

Career Development Process Today's career development process has become a threat for students, especially a question that may stun many students who have … [Read More...]

Strategic leadership

Strategic Leadership Model

Strategic Leadership Model The strategic leadership model is basically the study of the leadership style. It describes the ways of modernizing an … [Read More...]

Types of Managerial Decision Making

Types of Managerial Decision Making

Managerial Decision Making Decision Making is an art of selection of one feasible alternative decision from many. Therefore types of managerial decision … [Read More...]

Quantitative-management-approach

Quantitative Management Approach

Quantitative Management Approach The quantitative management approach is used to enhance decision making power by using quantitative tools. As well as … [Read More...]

Effective-business-messages-image

Effective Business Messages

Effective Business Messages The process through which business messages are effectively prepared that have the potential to create desired results from … [Read More...]

Search the Site

ADVERTISEMENT

Business Study Notes

Business Study Notes is all about business studies or business education. Visit us to find here free business notes of all the subjects of B.com, M.com, BBA & MBA online.

Disclaimer

All the images and videos present on the Business Study Notes are not owned by us, if you found anything under copyrights, please Contact Us, we will remove it ASAP.

Categories

© Copyright 2023 Business Study Notes. All rights reserved. Privacy Policy, Sitemap.  
DMCA
PROTECTED